A limited dependent variable is a variable whose range of
possible values is "restricted in some important way."
[
] In
econometrics
Econometrics is an application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics", '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8 ...
, the term is often used when
estimation of the relationship between the ''limited''
dependent variable
A variable is considered dependent if it depends on (or is hypothesized to depend on) an independent variable. Dependent variables are studied under the supposition or demand that they depend, by some law or rule (e.g., by a mathematical functio ...
of interest and other variables requires methods that take this
restriction into account. For example, this may arise when the variable
of interest is constrained to lie between zero and one, as in
the case of a
probability
Probability is a branch of mathematics and statistics concerning events and numerical descriptions of how likely they are to occur. The probability of an event is a number between 0 and 1; the larger the probability, the more likely an e ...
, or is constrained to be positive,
as in the case of wages or hours worked.
''Limited dependent variable'' models include:
*
Censoring, where for some individuals in a data set, some data are missing but other data are present;
*
Truncation, where some individuals are systematically excluded from observation (failure to take this phenomenon into account can result in
selection bias
Selection bias is the bias introduced by the selection of individuals, groups, or data for analysis in such a way that proper randomization is not achieved, thereby failing to ensure that the sample obtained is representative of the population inte ...
);
*
Discrete
Discrete may refer to:
*Discrete particle or quantum in physics, for example in quantum theory
* Discrete device, an electronic component with just one circuit element, either passive or active, other than an integrated circuit
* Discrete group, ...
outcomes, such as binary decisions or qualitative data restricted to a small number of categories.
Discrete choice models may have either unordered or ordered alternatives; ordered alternatives may take the form of count data or ordered rating responses (such as a
Likert scale
A Likert scale ( ,) is a psychometric scale named after its inventor, American social psychologist Rensis Likert, which is commonly used in research questionnaires. It is the most widely used approach to scaling responses in survey research, s ...
).
See also
*
Logit
In statistics, the logit ( ) function is the quantile function associated with the standard logistic distribution. It has many uses in data analysis and machine learning, especially in Data transformation (statistics), data transformations.
Ma ...
,
logit model,
ordered logit
*
Multivariate probit models
*
Probit,
probit model,
ordered probit
*
Tobit model
See also
*
Censored regression model
*
Selection bias
Selection bias is the bias introduced by the selection of individuals, groups, or data for analysis in such a way that proper randomization is not achieved, thereby failing to ensure that the sample obtained is representative of the population inte ...
*
Truncated regression model
References
Regression analysis
Design of experiments
{{econometrics-stub